Apple has a huge 'competitive advantage' over Facebook and Google

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  • Apple has been largely insulated from privacy concerns because of its focus on monetizing hardware, not software which is dependent on ads, UBS Analyst Steven Milunovich explains.
  • He believes this gives the company a “competitive advantage” compared to other tech giants like Facebook and Google who have faced lots of criticism over how it protects users’ data.
  • You can view Apple’s stock price here.

With all the hullabaloo surrounding Facebook‘s data breach scandal and Google‘s “right to be forgotten” directives, Apple can stand above the fray as the company that is in the best position to protect users’ data.

Apple’s business model focuses primarily on making money through its hardware, instead of on internet and software, which creates a heavy reliance on advertising for revenue. That makes it largely insulate the company from the European Union’s strict privacy protection laws.

“Although Apple sometimes speaks of privacy on moral grounds-Tim Cook says ‘privacy is a fundamental human right’-its business model makes emphasising privacy easier than for Google or Facebook,” Steven Milunovich, a UBS analyst, wrote in a note to clients.

Google and Facebook, on the other hand, will likely feel more pain because of their heavy reliance on advertising to drive revenues, Milunovich says. The EU’s General Data Protection Regulation (GDPR), which goes into effect on May 25, will restrict the kinds of data that companies can collect and requires consumers to opt-in to marketing campaigns, as well as give users more of a choice in what they would like to disclose. A Deutsche Bank analyst said the law could even wipe out as much as $US2 billion from Google’s revenues, for instance.

By contrast, Apple’s privacy policy does not allow its users’ data to be shared for marketing purposes, and it could turn out to be the company’s biggest “competitive advantage,” Milunovich says.

Its privacy stance could play out in a big way though its efforts to make its hardware devices the sole place for consumers to go to track their healthcare. Apple has several initiatives that tap into this large market, Milunovich notes, including an Apple Heart Study that allows iPhone and Apple Watch customers to become participants and track their exercise. Apple has also partnered with three electronic health record companies, which affords users easy access to their medical records through the HealthKit app on iPhones.

“We view the future as consumers owning their own health data,” Apple’s Chief Operating Officer Jeff Williams told CNBC.

Apple has maintained that all of the medical records are in full control of the user. The records are stored locally on the user’s device, and they not go onto Apple’s servers unless users opt-in for the records to be kept in the iCloud, according to Mashable. The records are also securely encrypted.

“How Apple monetizes beyond devices is not clear, but perhaps there is an opportunity to create a services platform” for healthcare, Milunovich wrote.

Milunovich kept his “Buy” rating and $US190 price target.

Read more about how Facebook’s privacy scandal reminds one analyst of the Equifax breach.

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